Inflation Cooled in March, but Stubborn Price Increases Remain
The central bank meets on May 3 to make its next policy decision, and officials are widely expected to raise rates by a quarter percentage point to just above 5 percent. Markets will be just as focused on what they signal for the future: Central bankers forecast in March that they might stop lifting interest rates after their next adjustment. Both incoming price and wage data and financial news could inform whether they feel comfortable hitting pause.
The Fed will also need to weigh turmoil in the banking sector as it considers its next move. A series of prominent bank failures in March sent tremors through the system, and those persist. First Republic has continued to struggle, and its stock plummeted this week. Problems in the industry can slow lending to consumers and businesses, weighing on the economy.
Already, consumption has been cooling. Personal spending was flat in March compared with the month before, Friday’s report showed, after falling 0.2 percent in February after adjusting for inflation.
With growth slowing and the bank issues further weighing consumers down, companies may find in the coming months that they are less able to charge more for their goods and services without scaring away customers. So far, though, many have retained an ability to raise prices.
“If we see inflation that warrants us needing to take additional pricing, we’ll take it,” Brian Niccol, chief executive at the burrito chain Chipotle, said during an earnings call this week. “I think we’ve now demonstrated we do have pricing power.”
Source: The New York Times
